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May 21, 2012, 6:00 am UTC

Yahoo has announced a plan to monetize 40 percent stake in the Alibaba Group back to the Chinese Internet company, concluding years of efforts by the two to reach an agreement.

The deal will see Alibaba Group buying back the stake from Yahoo Inc. for $6.3 billion cash and up to $800 million of Alibaba preference shares. Yahoo will divest an additional 10 percent of the Chinese company when Alibaba files for an initial public offering, which could come in the next few years. Yahoo expects to sell the remainder of its stake at a later date.

"The transaction will establish a balanced ownership structure that enables Alibaba to take our business to the next level as a public company in the future," Jack Ma said in a statement.

In addition to the share repurchase, the companies have also agreed to amend their existing technology and intellectual property licensing agreement. Among other things, this amendment will result in Yahoo! granting Alibaba a transitional license to continue to operate Yahoo! China under the Yahoo! brand for up to four years, while restrictions on Yahoo!'s ability to make other investments in China will be terminated.

Yahoo, a troubled Internet media company, plans to use the proceeds to increase shareholder value, principally by buying back a large number of shares. That would have the effect of shoring up Yahoo’s sagging stock price. The company, which has churned through three chief executives over three years, has been trying to improve on slow growth in advertising revenue.

Yahoo! bought its stake in Alibaba Group seven years ago for $1 billion in a deal that gave Alibaba control of Yahoo! China. It was a crucial cash infusion for Alibaba that powered founder Ma’s rise into the billionaire ranks. The companies’ relationship deteriorated after the tough-talking Carol Bartz took over as Yahoo! CEO.